QAV #710 — Do Ya Think I’m Sexy?

QAV 710 Club
[00:00:00] Cameron:
[00:00:15] Tony: One, two, three.
[00:00:16] Cameron: Wel­come back to QAV Tony, episode 710, 5th of March, 2024. What’s going on with UTK up there in sun­ny Syd­ney?
[00:00:30] Tony: Yeah, sun­ny, nice day today. It’s still pret­ty humid. It’s good to be out of sum­mer in Syd­ney. It’s, uh, weath­er’s cooled down a lit­tle bit, but it’s just that nice patch. Autumn and spring are always the nicest sea­sons. Uh, what’s going on with me? I’m clean­ing the apart­ment, pre­sent­ing it to show, and then the inspec­tion post­pones.
[00:00:48] Tony: So, wast­ing a lot of time spin­ning
[00:00:50] Tony: wheels with this process at the
[00:00:52] Tony: moment.
[00:00:53] Cameron: yeah, I’m shocked that it’s tak­ing you this long to sell it.
[00:00:56] Tony: Yeah, it’s, it’s sur­pris­ing to us too, um, but, uh, we’ve, we’ve time capped it now, so it’s got a six, six more weeks to
[00:01:04] Tony: run,
[00:01:05] Cameron: And then what? You just blow it up? Claim it on insur­ance? Set it on yeah.
[00:01:12] Tony: if only,
[00:01:15] Cameron: No? Okay.
[00:01:17] Tony: no, no, it’s, we’re call­ing for expres­sions of inter­est with a
[00:01:19] Tony: dead­line. Up until now, it’s just been open for inspec­tion. Almost like a pri­vate sale and yeah, we need to put some price ten­sion in there, give peo­ple a dead­line, get them think­ing that they’ve got to com­pete against some­body else and get the price up and get a result.
[00:01:37] Tony: Or not. And if we don’t, at least we know we, you know, got to move on, do some­thing else.
[00:01:41] Cameron: Mm. Well, speak­ing of things that are up, The All Ords has been up record highs in the last week.
[00:01:50] Tony: Ooh,
[00:01:52] Cameron: Dropped a lit­tle bit in the last day or so, but more record highs. Report­ing sea­son is over, but now we’re in div­i­dend sea­son. So I’ve had a cou­ple of shares in the last cou­ple of days that have breached a 3PTL or some­thing like that, but then I’ve gone and checked and they’ve gone ex div.
[00:02:10] Cameron: So I just want­ed to remind every­one, check your ex divs. Before you sell any­thing, a lot of div­i­dends float­ing around at the moment. But then we’ve got the ING results, Tony. I mean, we do, we hold ING in one of our live port­fo­lios. This is from the Aus­tralian, Fri­day the 16th of Feb­ru­ary, which is Cou­ple of weeks ago.
[00:02:33] Cameron: Ing­ham’s sinks near­ly 11 per­cent. Shares in poul­try pro­duc­er Ing­ham’s have slumped near­ly 11 per­cent in open­ing trade 3. 86 despite its strong results and lift­ing div­i­dends as investors digest its mixed out­look. The group’s half year prof­it jumped 268. 6% 63. 4 mil­lion as sales for the last half rose 8. 7 per­cent to 1.
[00:03:00] Cameron: 6 bil­lion as more Aussies opt­ed for chick­en over red meat in the cur­rent infla­tion­ary envi­ron­ment. UBS ana­lysts said it was a strong result, but the focus will be on the sus­tain­abil­i­ty of the record prof­itabil­i­ty per kilo­gram earn­ings skew in the sec­ond half and the poten­tial feed cost tail­wind in FY25.
[00:03:20] Cameron: So they announced a 268 per­cent prof­it jump. And their share price dropped 11%. It’s like, well, look, yeah, you had a good half. But, you know, what have you done for me late­ly? What are you going to do next half? This half?
[00:03:38] Tony: it’s exact­ly like that, isn’t it? That’s exact­ly what the mar­ket said. What have you done for me late­ly? Well, and, and, I mean, an impor­tant com­ment in that last para­graph you read was the last line where the ana­lysts are focus­ing on whether, well, the sus­tain­abil­i­ty of record prof­itabil­i­ty per kilo­gram and, um, poten­tial fee cost tail­wind in FY25.
[00:03:59] Tony: So they’re already wor­ry­ing about the future. And it’s inter­est­ing. I mean, it, it seems to be. More, I’ve nev­er real­ly noticed this before, but there seems to be a lot more empha­sis in this report­ing sea­son or in this mar­ket with for­ward esti­mates of earn­ings. It’s like if, you know, if you’ve had a good result, but you’re not fore­cast­ing a bet­ter result,
[00:04:23] Tony: the shares go down.
[00:04:25] Cameron: You did a Paul Porkin ING back in Decem­ber. I think it was the last show you did in Decem­ber. It was the Tur­duck­en episode.
[00:04:34] Tony: That’s right.
[00:04:38] Cameron: And from mem­o­ry, you seem to think it was a pret­ty good com­pa­ny. Pret­ty well run.
[00:04:44] Tony: Yeah, IMGs, yep, it’s been on and off the buy list for a num­ber of years. Yeah, so, what I’m think­ing is, I mean, we were talk­ing off here about regres­sion test­ing mod­els, and this is a key exam­ple where we could use one to see whether we give enough empha­sis in our check­list to fore­cast earn­ings per share.
[00:05:05] Tony: Whether we need to change the empha­sis on fore­cast earn­ings per share, it’s in our check­list. Um, we have a growth, a growth item in our check­list and, uh, but it’s only one point out of the pos­si­ble score, which is usu­al­ly out of about 15. So, uh, maybe it needs more, um, empha­sis if, um, if we’re being tripped up by these com­pa­nies, which are sol­id com­pa­nies, um, which are on the buy list.
[00:05:27] Tony: And then, uh, they, they just sim­ply say. Here’s some good results, and the ana­lysts jump on, start to wor­ry about the future, and the share
[00:05:36] Tony: price comes off.
[00:05:39] Cameron: Yeah, it’s uh, it’s an inter­est­ing time. Like I, so we bought them, I think we bought them back in Decem­ber. Um, they were, right about when you did your pulled pork, mid­dle of Decem­ber, they were trad­ing about 3. 85, went all the way up to 4. 30. That was a good bump, but now they’re back down to 3. 61 today.
[00:06:05] Cameron: They’ve recov­ered a lit­tle bit from their col­lapse in the mid­dle of Feb­ru­ary, dropped down to 3. 53. They’ve recov­ered a lit­tle bit, but not much of a recov­ery. It’s
[00:06:15] Tony: Have they paid a div­i­dend recent­ly? Sor­ry to inter­rupt, because they’re on a
[00:06:18] Tony: high yield from mem­o­ry.
[00:06:20] Cameron: they may have. Let me just pull up the old Stock Doc­tor. Uh, they, you know, they go X in March, 14th of March, anoth­er week or so. They go X. It’s a good div­i­dend though. It’s 12 cents, ful­ly
[00:06:35] Tony: Mm.
[00:06:36] Cameron: So that’ll be nice. But, uh,
[00:06:40] Cameron: yeah, but there’s still, uh, I mean, we did, they did­n’t breach. Uh, my sell trig­gers quite yet, because they did have that lit­tle run up, but um, I think they’re prob­a­bly close to a, close to a breach for me now. Any­way, it’s, I don’t know man, I, I, I can’t, I can’t fig­ure out why these com­pa­nies are get­ting pun­ished for doing a good job. Just seems wrong.
[00:07:06] Tony: And there’s also very quick fire respons­es these days
[00:07:09] Tony: too, isn’t there? This report­ing sea­son in par­tic­u­lar, we’ve seen moves with­in the hour of the results com­ing out, dou­ble dig­it
[00:07:15] Tony: moves, which is a bit unusu­al
[00:07:17] Tony: too.
[00:07:18] Cameron: Like in a day, because they deliv­ered a record result. Let’s see. Uh, we bought them on the 30th of Novem­ber, actu­al­ly, before your pull pork, uh, trad­ing at 3. 80. I bought it. We bought them at 3. 80, cur­rent­ly 3. 63. So they’re down 5%. But, uh, any­way, I can’t make any sense out of it. Just seems very harsh. On the oppo­site side of that, Ray Dalio, our old friend. Thinks the Mag­nif­i­cent Sev­en are fair­ly priced, Tony. Ray Dalio, yeah, this is in the Finan­cial Review, Ray Dalio says his sim­ple answer for investors ask­ing if US equi­ties over­all or the Mag­nif­i­cent Sev­en mega cap tech­nol­o­gy stocks in par­tic­u­lar are in a bub­ble is no. In a post on LinkedIn, the bil­lion­aire founder of Bridge­wa­ter Asso­ciates said he used six cri­te­ria to define a mar­ket bub­ble, and while some of the cri­te­ria were ele­vat­ed, most were not.
[00:08:12] Cameron: When I look at the U. S. stock mar­ket using these cri­te­ria, it, and even some of the parts that have ral­lied the most and got­ten media atten­tion, does­n’t look very bub­bly. The mar­ket as a whole is in mid range, 52nd per­centile. Cur­rent mar­ket lev­els, Mr. Dalio also said, are not con­sis­tent with past bub­bles.
[00:08:30] Cameron: Mags, the Mag 7 is mea­sured to be a bit frothy. But not in a full on bub­ble. Val­u­a­tions are slight­ly expen­sive giv­en cur­rent and pro­ject­ed earn­ings. Sen­ti­ment is bull­ish but does­n’t look exces­sive­ly so, and we do not see exces­sive lever­age or a flood of new and naive buy­ers. That said, one could still imag­ine a sig­nif­i­cant cor­rec­tion if these name in these names of gen­er­a­tive AI does not live up to the priced in impact.
[00:08:59] Cameron: Uh, what do you think about that, Tony?
[00:09:02] Tony: Yeah, I did­n’t. I’m not so, uh, san­guine about his, even his state­ments. He’s say­ing that we’re not see­ing a flood of new and naive buy­ers. I think that’s all we’ve seen, real­ly. Every­one’s, every­one’s talk­ing about the MAG7 and buy­ing either an ETF to get expo­sure to them or buy­ing them direct­ly. Um, that’s been hap­pen­ing for a while now, um, Nvidi­a’s the case in point, Tes­la’s the case in point, Apple’s the case in point, so, yeah, I’m not sure, I mean, he’s say­ing he’s not going to release what his cri­te­ria are, so he’s got a dif­fer­ent point of view, um, He is say­ing, I think he was using NVIDIA, for exam­ple, say­ing, I think he said some­where else in the arti­cle, it trades on a 27 times PE for for­ward earn­ings, which is high, but not exces­sive­ly high, and again, you know, the, uh, Peter Lynch’s met­ric of the PEG ratio, divid­ing PE by growth would bring NVIDIA down to rel­a­tive­ly low.
[00:10:11] Tony: Benign PE, um, so I can see what he’s say­ing around that, but the growth’s got­ta hap­pen. And, um, when­ev­er, when­ev­er we have stocks with ele­vat­ed PEs, even if they are grow­ing fast, if they, as soon as they hit a road bump, the PE con­tracts and the share price drops dra­mat­i­cal­ly. So that’s, that’s my con­cern with them, whether in a bub­ble or not.
[00:10:31] Tony: I mean, it’s, it’s pret­ty hard to debate peo­ple about what a bub­ble is. Usu­al­ly we only pick it up after a burst and then we say, oh yeah, that was a bub­ble. I’m more inclined to say if some­thing’s run­ning away, way above index, then it’s prob­a­bly in a bub­ble. Whether it bursts this year, next year, or in five years, I’ve got no idea.
[00:10:50] Tony: Um, but, but I thought some of Ray Dalio’s own met­rics and argu­ments could be used against
[00:10:55] Tony: him.
[00:10:57] Cameron: Well. You know, I’ve got two things to say.
[00:10:59] Cameron:
[00:11:00] Tony: Oh, this time
[00:11:01] Tony: it’s
[00:11:02] Cameron: Yeah, it was
[00:11:02] Tony: this, this time it’s dif­fer­ent. Yeah. . And
[00:11:04] Tony: don’t gimme neg­a­tive
[00:11:05] Cameron: Yeah, but they
[00:11:06] Cameron: were the two. Yeah.
[00:11:07] Cameron: How did you guess
[00:11:08] Tony: Mm-Hmm.
[00:11:09] Cameron: Uh, um, but I was also gonna point out that back in April, 2021, we were talk­ing about Ray Dalio say­ing that he thought Bit­coin, he sud­den­ly con­vinc­ing that Bit­coin was a good invest­ment.
[00:11:24] Cameron: Now, in April, 2021, uh, Bit­coin was trad­ing at about $79,000 Aussie by May of 2021, it had dropped down to $46,000. Aussie. Uh, then it went up to 89 by Novem­ber 21. Then it went down to 24, 000 by Novem­ber 2022, but it’s now up to 97, 000, no 104, 000 Aussie today.
[00:11:51] Tony: Wow.
[00:11:52] Cameron: So it’s gone from when he talked about, about 74, 000, it’s gone up, what’s that like, you know, yeah, rough­ly 25, 30 per­cent in a rough­ly three year peri­od. Which is not fan­tas­tic, but it’s not bad either. Um Yeah,
[00:12:14] Tony: it?
[00:12:15] Cameron: yeah, yeah, yeah, so, I don’t know, Ray’s, Ray’s pre­dic­tion abil­i­ties, I’m not exact­ly sure about right now,
[00:12:26] Tony: Yeah. Look, he’s, look, I, I think, I think these. These kinds of dis­cus­sions are almost aca­d­e­m­ic. He’s say­ing he thinks they’re fair­ly priced, um, because they’re not in the bub­ble. Well, to me, some­thing’s fair­ly priced if it’s about the aver­age for the P for the mar­ket or below. Um, and the Mag­nif­i­cent Sev­en aren’t.
[00:12:47] Tony: They’re way above that. So, you know, whether it’s a bub­ble, whether they’re just on a growth curve, which attracts Buy­ers, whether there’s a lot of index funds, which are forced to buy them, which I think is prob­a­bly the case. Um, yeah, whether they’re. Whether they’re in a bub­ble or not, I would­n’t say they’re fair­ly priced, like they’re priced to per­fec­tion.
[00:13:08] Tony: And that’s, to me, is always a bad sign if you’re buy­ing a stock because per­fec­tion nev­er
[00:13:13] Tony: hap­pens.
[00:13:16] Cameron: except in my case.
[00:13:18] Tony: Right, so you, uh, what’s your stock? What’s the PE on your stock, Kev?
[00:13:23] Cameron: Oh, it’s, it’s, it’s unlim­it­ed if you ask Chrissie. Well, speak­ing of some­one who is doing, uh, whose pre­dic­tion abil­i­ties I do respect, our old friend, Michael Gold­berg from Collins Street Asset Man­age­ment. He’s been on the show a cou­ple of times, I think. Anoth­er sto­ry about him in the finan­cial review today. And
[00:13:48] Tony: to have him back on too,
[00:13:49] Tony: because he’s always been a good guest, a good val­ue
[00:13:51] Tony: investor.
[00:13:52] Cameron: Yeah, they used to reach out to me every
[00:13:53] Cameron: six months.
[00:13:54] Cameron: I haven’t heard from them for a while. I bet I should fol­low them up. Um, Finan­cial
[00:13:58] Tony: well they prob­a­bly don’t, they prob­a­bly don’t need us
[00:13:59] Tony: any­more.
[00:14:00] Cameron: Ha ha ha. Ah,
[00:14:02] Tony: They’re in the Fin Review now,
[00:14:03] Tony: don’t need us
[00:14:04] Cameron: Well, that’s how we found out about them in the first place. They’re in the Fin Review, I think. Uh, The Old School Fund Mak­ing Big Mon­ey From Cig­ar Butt Trades. In the Fin on the 4th of March, as yes­ter­day.
[00:14:17] Cameron: First in, first out, then leave the spec­u­la­tors to have their fun. That appears to be the dri­ving ethos behind the suc­cess of Mel­bourne’s The Collins Street Val­ue Fund and it seems to be work­ing. While most of the top per­form­ing funds over the past decade have relied on own­ing U. S. tech­nol­o­gy stocks or sim­i­lar growth and qual­i­ty plays, Collins Street has qui­et­ly bus­ied itself with the so called cig­ar butt trades.
[00:14:42] Cameron: The often maligned invest­ment approach, made famous as the ear­ly strat­e­gy of US invest­ment leg­end War­ren Buf­fett, is not some­thing Collin Street founder Michael Gold­berg shies away from. The very heart of what we’re try­ing to do is pret­ty sim­ple. We’re try­ing to buy 1 worth of assets or earn­ings for 0.
[00:14:58] Cameron: 50. My favorite kind of invest­ment is cer­tain­ly a cig­ar butt, he says. The focus on tar­get­ing unloved stocks has helped the fund to occa­sion­al­ly spot oppor­tu­ni­ties way ahead of the mar­ket, and in some cas­es, per­haps too far ahead. It was in 2017 that Collins Street began to explore ura­ni­um stocks, a sec­tor so bombed out that Gold­berg and his team built an in house ura­ni­um ETF from scratch to gain expo­sure in Aus­tralia.
[00:15:25] Cameron: It took four years for the stocks to re rate and the fund to bank a tidy prof­it, mak­ing Collins Street well posi­tioned for the record ral­ly that swept the ura­ni­um sec­tor unex­pect­ed­ly in the back half of last year. The only prob­lem was, they had sold out a year ear­li­er. A lot of times, as we’re sell­ing out of our posi­tion, those who are buy­ing in are look­ing to get some­thing for a dol­lar today that they think can be worth two dol­lars tomor­row, he says.
[00:15:49] Cameron: Good luck to the peo­ple who bought from us. I wish them well, but that’s just not how we play crick­et. Uh, so it’s a good sto­ry, but it says that, um, over five years Accord­ing to the most recent Mer­cer Fund sur­vey, Collins Street took out the top spot over five years, gen­er­at­ing 24 per­cent per annum before fees, and they topped the sur­vey back in 2020 with a one year return of around 46%, which is, I think, about when we had them on the first time.
[00:16:18] Cameron: Um. He says, if growth stocks or lithi­um stocks or buy now, pay lat­er is the new thing, then there is an incli­na­tion to try and fol­low, espe­cial­ly if your stocks aren’t doing well. We’re not real­ly in the busi­ness of spec­u­lat­ing. Once some­thing reach­es our esti­ma­tion of intrin­sic val­ue, then we’re hap­py to sell and leave it to the growth guys who can get the cream off the top. Any­way, I like the fact that they just keep stick­ing to their sys­tem, which is sim­i­lar to our sys­tem. They’re much more hands on. I seem to recall they go out and they inter­view CEOs and they research com­pa­nies and, as you would expect, they’re full time fund man­agers. This is what they do. But, uh, the whole idea of buy­ing under­val­ued, good per­form­ing busi­ness­es is still putting them in the num­ber one spot.
[00:17:12] Cameron: Of all the funds, so, you know,
[00:17:14] Tony: yeah, you would­n’t have thought that giv­en the last dis­cus­sion about the MAG7, but yeah, it’s good. Um, so a cou­ple of take­aways I have from the arti­cle, which I thought was very good. Um, you’ve already quot­ed one part of it. We’re try­ing to buy a dol­lar’s worth of assets or earn­ings for 50 cents. And then he talked about poten­tial­ly sell­ing out too soon and said a lot of times as we’re sell­ing out of our posi­tion, those who are buy­ing in are look­ing to get some­thing for a dol­lar today that they think can be worth 2 tomor­row.
[00:17:45] Cameron: mm,
[00:17:46] Tony: And, and that’s. I mean, it’s a very pithy cou­ple of quotes, but that’s just such a dif­fer­ent mind­set from both of those per­spec­tives. So, on the one hand, he thinks, Michael thinks, hey, here’s an asset, it’s worth a dol­lar, but I can buy it for 50 cents. I’m going to do that because Even­tu­al­ly there’ll be a regres­sion to the mean and peo­ple will work it out and the val­ue will return to what it should be and we’ll get out and make dou­ble our mon­ey.
[00:18:17] Tony: Um, and if that hap­pens in four or five years, then we’ve got a good CAGR mar­ket beat­ing CAGR. Um, as opposed to the mind­set of the growth investor who said, here’s some­thing that’s worth. What I think it’s worth, but in the future, I think it’ll be worth a lot more. Um, and so I’m going to take a punt that every­thing goes right and we get 2 for the 1 we’ve invest­ed now.
[00:18:41] Tony: And they’re very dif­fer­ent things. One’s, one’s sim­ply say­ing, I’ve found, I’ve done a bit of rock hunt­ing and I found a gem and I pull it, it’s, it’s going to get pol­ished up and then it’ll be worth more. And the oth­er one’s say­ing, I’ve, I found the gem and if every­thing goes right, I can sell it for twice as much.
[00:18:57] Tony: And I think that’s a real­ly insight­ful dif­fer­ence on the per­spec­tives of why I think cig­ar butt invest­ing is a bet­ter risk bet than
[00:19:06] Tony: pric­ing some­thing to per­fec­tion and
[00:19:08] Tony: hop­ing every­thing goes right.
[00:19:09] Cameron: mm. And the lat­ter of those two is also part­ly the greater fool the­o­ry, right? I’m hop­ing I’ll be able to find some­one who’s stu­pid enough to pay more for this than I did.
[00:19:21] Tony: Yeah. There’s part­ly that. It’s, but the dif­fer­ence I think is say­ing I’ve found a busi­ness now, which I know today is worth a dol­lar. Not next year, not next week, not
[00:19:31] Tony: next,
[00:19:32] Tony: not in five
[00:19:33] Cameron: because I can see it on
[00:19:33] Tony: worth a dol­lar. I can see it on
[00:19:35] Cameron: I know what
[00:19:36] Tony: And he’s prob­a­bly, he’s prob­a­bly gone out and checked out the fac­to­ry and the stock and all that kind of stuff too.
[00:19:41] Tony: So he can see the assets and knows he could sell it for a dol­lar. Um, that’s dif­fer­ent to hav­ing the MD say to you, Oh, but if we, you know, I’m just going to do this and that. And in the year’s time will be worth 2. So one, one’s I can touch it. I can feel it and the mar­ket’s got it wrong. And the oth­er one is I’m back­ing the sto­ry.
[00:20:00] Tony: And if every­thing goes right, I’ll get my mon­ey back and dou­ble it
[00:20:04] Tony: some­time in the future. They’re very dif­fer­ent
[00:20:06] Tony: things.
[00:20:06] Cameron: Yeah, dif­fer­ent mind­sets, dif­fer­ent approach­es. Mm
[00:20:12] Tony: I love the sto­ry they spoke about their lat­est, I think one of the lat­est the­o­ries was to get into the, um, off­shore marine con­tract­ing space and they took a, they took a stake in MMA off­shore, but they then dis­cov­ered the, uh, off­shore oil and gas ser­vices space had been com­plete­ly dec­i­mat­ed over the pre­ced­ing decade and what com­pa­nies were left were basi­cal­ly who­ev­er could sur­vive.
[00:20:35] Tony: And then Michael says, it
[00:20:36] Tony: It was like in the movie For­rest Gump when he comes back from the shrimp boat to find all the com­pe­ti­tion had been wiped out by a storm, so they build up a fleet and make a for­tune. Yeah, I think what he means to say is he came back in a shrimp boat. Any­way. Um, yeah. And, and so again, that’s a, he’s, he’s found a mar­ket that sun loved that’s worth a lot more, that’s valu­able, but peo­ple aren’t pay­ing enough for it.
[00:21:02] Tony: And he’s wait­ing for the, the mar­ket to wake up
[00:21:04] Tony: to that
[00:21:05] Cameron: hmm. Yeah, like it’s I was lis­ten­ing to, um, I’ve start­ed this thing in my newslet­ters recent­ly, that what­ev­er song hap­pens to be play­ing on Spo­ti­fy, I try and find a mes­sage in the song, in the lyrics of the song that, that teach­es me some­thing about invest­ing. And the one that hap­pened to be on this morn­ing was, um, a cov­er of Rod Stew­art’s, Do You Think I’m Sexy by a band called Queen of Japan.
[00:21:34] Cameron: And it’s quite a good cov­er that I like. And, um, I was like, well, that’s, that’s, you know, the All Ords and the Mag 7 right now is Do You Think I’m Sexy? Look at me. I’m, I’m, I’m up, every­thing’s going great. Um, and I, I was think­ing about. I mean, the mar­ket is up, um, you know, as we said off air, it’s like, uh, I think the All Ords is up about 11 per­cent since the begin­ning of Novem­ber.
[00:22:00] Cameron: The STW is up about 14 per­cent since then. I think our dum­my port­fo­lio is up about 11 per­cent since the begin­ning of Novem­ber. Um, so that’s like, what, uh, four months, it’s up about 11 per­cent in four months, which is not bad. Um, but, you know, I was think­ing about all the peo­ple that capit­u­lat­ed last year.
[00:22:23] Cameron: You know, all the investors, we know QAV club sub­scribers that aren’t around any­more. And we know, you know, just from gen­er­al read­ing in the media that a lot of investors capit­u­lat­ed and got out of the mar­ket with the tur­bu­lence last year. And here the mar­ket is back at all time highs, uh, and all of that growth that’s hap­pened, I mean, there was a lot of, there was a lot of down cycles there as well, but there was a lot of up cycles.
[00:22:47] Cameron: So. If you just stick in, this is just anoth­er learn­ing for me as a, you know, new at this, five years in, that things go in cycles, right? It’s cycles, Jer­ry, cycles. Things go up, things go down, you stick around long enough, they go back up again,
[00:23:04] Tony: Yeah. And I had this dis­cus­sion with, with my wife recent­ly because she was say­ing, oh, the mar­ket’s at an all time high. Should we sell and get out? And I’m like, it’s at an all time high, but it’s tak­en since 2008 to get here. So what’s that?
[00:23:19] Tony: What’s it now, 24, so 16 years to get here. So, um, yeah, it could go down, but I sus­pect it’s got more to run hav­ing tak­en that long
[00:23:29] Tony: to get back to an all time
[00:23:30] Tony: high
[00:23:31] Cameron: And then it will go down, and then
[00:23:33] Tony: it will go down.
[00:23:34] Tony: Exact­ly. And you can’t pre­dict it and it might go down and then come back up. So it’s, yeah, it’s, um, it’s, you
[00:23:41] Tony: can’t pre­dict it. So you’ve got to stay in
[00:23:42] Tony: it.
[00:23:43] Cameron: And that’s, like, it’s been one of the learn­ings for me, as we’ve been doing the show over five years, is just watch­ing these cycles go. Uh, you know, we had, COVID was the first one, then it recov­ered, then we had Ukraine, and then we had inter­est rates, and it’s just blow after blow, and then it recov­ers. And then it gets knocked down, and then it gets back up, and, and after a while, you go, yeah, okay, what­ev­er.
[00:24:06] Tony: Yeah,
[00:24:07] Cameron: just
[00:24:10] Tony: It’s
[00:24:10] Tony: all noise.
[00:24:11] Cameron: It is, and it’s
[00:24:12] Cameron: like, but It’s the do you think I’m sexy thing, it’s like, no, I don’t think you’re sexy, it’s just, I buy stuff that the sys­tem tells me to buy, I sell stuff the sys­tem tells me to sell, and then I buy the next thing it tells me to buy, and I don’t care. Like, I real­ly don’t care, real­ly, like, I mean, I’m hap­py when things are going up because that’s, I guess, that’s an eas­i­er place to be, there’s less trad­ing going on, you know, you don’t have to get, you know, do buy lists and check­lists and all that kind of annoy­ing non­sense, but, um, Real­ly, it’s just kind of bor­ing.
[00:24:53] Cameron: Does­n’t mat­ter what’s going on, right? Just buy when you have to buy some­thing, sell when you have to sell some­thing and Well,
[00:25:02] Tony: Tune out,
[00:25:02] Tony: tune out the
[00:25:03] Cameron: tune out the
[00:25:04] Tony: When you, well I thought you were going to say when you, when you’re lis­ten­ing to Do You Think I’m Sexy? I thought you were going to talk about SXY, the uh, Cenex Ener­gy. I thought you’d uncov­ered some­thing
[00:25:14] Tony: there. A hid­den, a hid­den
[00:25:16] Cameron: Uh, I had­n’t thought of that, I have to go and look. I will speak about hid­den gems though, um So, as you know, we’ve talked about this off air, um, and I’ve men­tioned this on the show in recent weeks. One of our lis­ten­ers, um, Matt Walk­er Um, has built a tool that I’ve been test­ing for regres­sion test­ing and it’s, I’ve, I’ve spent a lot of time in it and par­tic­u­lar­ly in the last week and it’s, it’s doing some­thing wrong.
[00:25:41] Cameron: I know that it’s cal­cu­lat­ing the three point sell line incor­rect­ly because when I look at its out­put and I look at the stocks that it’s sold and then I go and try and fig­ure out why they’re not real ones and they’re not. 3 point trend line sell, so it’s doing some­thing wrong. But one, one thing I did notice that was com­mon across all the ones that I checked was they were sold at a time when they dropped below the sec­ond buy line, not below the sell line.
[00:26:15] Cameron: Some­times they are below the sell line. Gen­er­al­ly they, they, a lot of cas­es they’re well above the three point cell line, but they drop below the sec­ond byline. The inter­est­ing thing is, uh, in the tests that I’ve run using this with either a 10% rule, one or a 20% rule one, it’s deliv­er­ing a 25% CAGR going using data, uh, from 2016 build­ing buy lists from 2016 through to the end of 2023.
[00:26:43] Cameron: So essen­tial­ly a sev­en year, um, uh, time­frame. Um, so, I’m not sure why. Yet, and I got to talk to Matt and I got to play with the code and try and get more, um, fine tweak­ing of it so I can work out what’s going on. But it’s just one of those things that I want­ed to let peo­ple know we’re look­ing into, like we still think there are some per­haps changes that we can tweak the sys­tem with.
[00:27:13] Cameron: That might deliv­er a much bet­ter result than the dou­ble mar­ket that we are aim­ing for. If we can, if we can notch it up from dou­ble mar­ket to 25, which is like almost, uh, three times, two and a half times mar­ket, maybe, you know, near­ly three times, depend­ing on how you rate the mar­ket’s long term per­for­mance.
[00:27:36] Cameron: Uh, you know, that’d be great. And I think with these new tools that some of our lis­ten­ers have been devel­op­ing, we’re get­ting quite close to being able to do some very, uh, long time­framed regres­sion test­ing, uh, test­ing a whole bunch of fine tuned met­rics and being able to do it. Quick­ly, like when I was run­ning these things over the week­end, uh, you know, it would take 15 min­utes to an hour to run a regres­sion test using a vari­ety of met­rics.
[00:28:04] Cameron: Um, so that’s, you know, it’s kind of very cool. And the code could prob­a­bly opti­mized a lot, so I could do it a lot faster than that too.
[00:28:13] Tony: it is very cool, and thank you to Matt for that. Well, the first thing I can say is, don’t touch the code. If it’s get­ting 25 per­cent Kag­gle, can you print it out so we can pick it
[00:28:22] Tony: apart and try and use it
[00:28:23] Tony: going for­ward?
[00:28:24] Cameron: Yeah, well, we need to
[00:28:26] Cameron: make sure it’s actu­al­ly giv­ing us accu­rate results. But, uh, yeah.
[00:28:31] Tony: bug­gy, let’s find out what the
[00:28:32] Tony: bugs are.
[00:28:32] Tony: They could
[00:28:33] Cameron: They’re fea­tures. Fea­tures, not
[00:28:35] Tony: they’re fea­tures.
[00:28:36] Tony: Right,
[00:28:37] Tony: Yeah.
[00:28:38] Cameron: Yeah. Yeah. That was my first reac­tion was, well, it’s not doing it prop­er­ly, but I like what it’s doing
[00:28:45] Tony: doing it bet­ter.
[00:28:46] Cameron: Yeah. Yeah. Yeah. Um, so any­way, that’s, that’s been kind of excit­ing me over the last week.
[00:28:54] Cameron: Um,
[00:28:56] Cameron: that’s about that. I was just going to men­tion the Stock­o­pe­dia port­fo­lio as peo­ple know I’ve been test­ing using Stock­o­pe­dia as a data source instead of Stock Doc­tor and has some lim­i­ta­tions because they don’t have the same data and they do some data a lit­tle bit dif­fer­ent­ly. Um, The, the, uh, the Stock­o­pe­dia Aus­tralia port­fo­lio, which kind of start­ed in July 2023, is down 5%, uh, ver­sus the dum­my port­fo­lio over the same peri­od, which is about up 10%.
[00:29:27] Cameron: But the last of the Stock Doc­tor Lite port­fo­lios, the 231 port­fo­lio, is also down about four and a half per­cent over the same peri­od. So, I was, I was The rea­son I say that is because when I was look­ing at the Stock Doc­tor, sor­ry, the Stock­o­pe­dia one today, I was almost think­ing, I’m just gonna, I’m just gonna knock this one on the head.
[00:29:48] Cameron: It’s not deliv­er­ing the results it should be deliv­er­ing. There’s a prob­lem with the data that I’m using. But, I’m not so sure. I think it actu­al­ly might be, when I com­pared it to the oth­er one. You know, I think that the rea­son why the dum­my port­fo­lio is doing so well at the moment is it’s had such a long Time to estab­lish itself that so many of the stocks are well above their rule one well above their three point trend line.
[00:30:17] Cameron: They can drop 10, 20. And I don’t even know, notice it. And then they recov­er. And you know, so it’s just runs by itself as opposed to that rule one cycle of death that we’ve been in with some of the light port­fo­lios, which got start­ed in the mid­dle of the, the tur­bu­lent peri­od, the Ukraine inter­est rate tur­bu­lence.
[00:30:42] Cameron: Um, and so, uh, yeah, the Stock Doc­tor US port­fo­lio, sor­ry, the Stock­o­pe­dia US port­fo­lio, which was start­ed around about the same time, is up 5%. Um, using the same sort of data lim­i­ta­tions and, you know, work­ing in a mar­ket that I’m not exact­ly famil­iar with. Um, so I’m still, I just want to let peo­ple know, I’m still play­ing around with this.
[00:31:08] Cameron: I haven’t come to a con­clu­sion about these yet, but again, with the regres­sion tool, as you point­ed out, sort of off air. You know, if we get this regres­sion tool work­ing prop­er­ly, we can sort of elim­i­nate from our regres­sion tests, the data points that we can’t get out of Stock­o­pe­dia and see how that per­forms.
[00:31:23] Cameron: And maybe it can tell us whether or not those data points are real­ly that impor­tant or not.
[00:31:29] Tony: cor­rect. Yeah. Yes, no, I agree, but it’s an impor­tant point you make, and that’s some­thing that peo­ple should bear in mind is that it does take 6 months, 12 months, a cou­ple of report­ing sea­sons, I’m not sure there’s a defined time peri­od, but it does take a while for a port­fo­lio to bed down. Um, and, and for the stocks to have risen enough so that they’re, they’re less like­ly to be buf­fet­ed by our sell trig­gers, um, that stocks can be after they’re first pur­chased.
[00:31:59] Cameron: Yeah.
[00:32:00] Tony: And plus, you know, we’ve spo­ken before about the rock­et stock, the Michael Jor­dan, you, you, you get a cou­ple of those in your port­fo­lio and you’re hold­ing them for a long time. So and it helps per­for­mance and you’ve got to, you know, they take prob­a­bly more than six months to to show them­selves often. So yeah, so it’s an impor­tant point.
[00:32:20] Tony: Don’t get too dis­cour­aged in the first six months if you’re trad­ing and the results are under­per­form­ing, they will get bet­ter.
[00:32:26] Cameron: won­der what the, uh, Michael Jor­dan is right now in the dum­my port­fo­lio. I’m just hav­ing a quick look. Um, let’s see. Oh, wow. Yeah. I mean, there’s a cou­ple of good ones. KOV, Covest, up 151 per­cent since April 2020. I’ve been hold­ing that, uh, KSC up 96 per­cent since August 2021, LAU up 151 per­cent exact­ly the same as KOV since June 2022, uh, DUR up 81 per­cent since Feb­ru­ary 23.
[00:33:08] Cameron: Um, you know, a lot of these stocks are up 50, 80, 100, 150 per­cent in the dum­my port­fo­lio. Uh, there’s a cou­ple, ASG, which we’ve held since August 2022, is only up 9%. CLX, Novem­ber 22, up 10. ANZ, Octo­ber 23, up 11. CNU, Novem­ber 23, it’s the most recent, no, not the most recent, um, up 6%. RMC is the most recent, it’s the only one that’s down, it’s down 11%, um, but it’s got a div­i­dend that’s gone X, which is why I’m hold­ing on to it still.
[00:33:50] Tony: And that’s the point. So like, because we’ve got stocks that have been there for one, two, three, four years, um, you can have stocks which become a rule one sell and it’s not going to affect the port­fo­lio per­for­mance that much. Where­as if it’s the first few months after you bought the entire port­fo­lio, you start to have rule ones.
[00:34:06] Tony: You haven’t got that stock you’ve held for a long time to coun­ter­weight it. So it seems like you’re trad­ing a lot and it’s affect­ing per­for­mance.
[00:34:13] Cameron: Yeah. But so yeah, a lot of those stocks, you know, there’s a lot of give in there. A lot of give. Any­way, that’s all I have to talk about today. TK, what have you got?
[00:34:27] Tony: I had, uh, had the, the ques­tion that was asked last week was about whether the ASX is shrink­ing and how does that affect us? And so I, I had a cou­ple of con­ver­sa­tions dur­ing the week about it and, and asked some peo­ple in the funds indus­try around it. And I won’t name ones because I did­n’t. Tell them I was going to name
[00:34:48] Tony: them, so I don’t want to reveal
[00:34:50] Tony: sources, but a cou­ple of,
[00:34:52] Cameron: They haven’t paid you for adver­tis­ing.
[00:34:54] Tony: of
[00:34:54] Cameron: They got­ta pay up first.
[00:34:57] Tony: points of view I thought were inter­est­ing and worth report­ing back.
[00:35:00] Tony: Um, one view was that the ASX does­n’t do a good job at encour­ag­ing floats, um, and the per­son who I think he said that the ASX new IPO depart­ment was shut for a cou­ple of months over Christ­mas, so they just weren’t even open to new floats back then. Um, but they also thought that one of the rea­sons why IPOs were shrink­ing was that the major­i­ty of IPOs are gen­er­al­ly small cap stocks, um, that list, and that, uh, there seems to be a bit of a shift, this per­son thought, as, as Index funds as super funds as, um, your, your large funds like Van­guard and, you know, uh, Brook­wa­ter, et cetera, get big­ger and big­ger.
[00:35:57] Tony: They’re devot­ing less mon­ey to the small cap space and, and this per­son I spoke to thought that the, um, the aver­age amount of, say, an Aus­tralian super fund, indus­try super fund or for prof­it super fund was Devot­ing to even just the ASX in total was only about 5 per­cent of their mon­ey, so they’re gen­er­al­ly devot­ing a lot to over­seas, prob­a­bly a lot to the US with the MAG7 on the run, some to emerg­ing mar­kets, and then some to just non stock.
[00:36:26] Tony: Assets like com­modi­ties or prop­er­ty or what­ev­er else they’re invest­ing in. So only, um, his view was only about 5 per­cent of the mon­ey was being, um, deployed into the ASX, um, and, you know, on an index basis, most of it’s flow­ing towards the big cap stock. So, uh, he thought there was­n’t enough veloc­i­ty of mon­ey as he called it, going into the small cap area on the mar­ket.
[00:36:50] Tony: And that was also deter­ring, um, small com­pa­nies from even try­ing to IPO. on the ASX because they just weren’t get­ting enough investor band­width to make it worth their while. There’s also a con­sol­i­da­tion in the small cap fund space, which is, I guess, Back­ing up that argu­ment that there’s less mon­ey around and there’s also, uh, less, um, finan­cial advi­sors.
[00:37:17] Tony: So whether it’s a good thing or a bad thing that they have to be qual­i­fied, there’s a lot that have left the indus­try and there was a, there was a mar­ket­ing chan­nel for small caps through, through wealth advi­sors and fund man­ag­er net­works. Um, even if it was just sim­ply that they were being paid a com­mis­sion to put your small cap.
[00:37:36] Tony: stock in front of investors um, but but that’s shrunk­en as a chan­nel too. So that’s affect­ing things. And then there’s also been a trend to pri­vate equi­ty to get involved in buy­ing small caps before they’re ready to list and to let them grow um before sale and of course the ven­ture cap­i­tal firms tak­ing a lot of the tech com­pa­nies at start­up phase and not get­ting them to the, um, to an IPO at the ASX, poten­tial­ly tak­ing them over­seas or, or let­ting them stay pri­vate for a very long time.
[00:38:10] Tony: So there’s a few rea­sons why the IPOs are dry­ing up. Um, and the oth­er one that was, uh, Ven­tured to me was, you got to look at the fees of list­ing a com­pa­ny on the ASX and this per­son talked about Chemist Ware­house and how they, the funds man­age­ment indus­try and stock break­ing indus­try had been sali­vat­ing for a long time wait­ing for Chemist Ware­house to be an IPO on the ASX because they could clip the tick­et and make a lot of mon­ey out of it.
[00:38:41] Tony: Chemist Ware­house and its own­er­ship group knew that, and they’ve basi­cal­ly done a back­door list­ing via Sig­ma Phar­ma­ceu­ti­cals, who’ve reversed, did a reverse takeover to take Chemist Ware­house to the, to the ASX boards, but under the code of Sig­ma, so It’s get­ting to the stage where peo­ple like Chemist Ware­house are try­ing to game the sys­tem to avoid pay­ing for under­writ­ers fees, pay­ing for pro­duc­ing PDSs, pay­ing the ASX to list, all those kinds of fees that are part of the IPO process, which is sub­stan­tial.
[00:39:18] Tony: Yeah, so I think Uh, I think there needs to be a bit of a rethink of the whole buy PO process, buy the ASX, to encour­age some, some more list­ings, because they just aren’t hap­pen­ing at the moment.
[00:39:32] Cameron: And why would the ASX want to encour­age more list­ings? Why does the ASX care? The
[00:39:41] Tony: Bit like, bit like
[00:39:42] Cameron: right?
[00:39:43] Tony: Well, it’s, um, it’s to, there’s a churn going on. So the ques­tion was raised last week. The, that the A SX is shrink­ing because a lot of takeovers are hap­pen­ing and com­pa­nies are being tak­en either merged or tak­en off­shore or, or pri­va­tized. Um, and typ­i­cal­ly what hap­pens in the past is that if there’s 10 com­pa­nies tak­en over in the year, there’s 20 IPOs.
[00:40:03] Tony: And so the A SX does­n’t shrink, but at the moment, I can’t think of any IPOs. Um, in the last. 6 to 12 months, um, and yet there’s been, you know, 10 to 20 takeovers. So the ASX is shrink­ing, and the tra­di­tion­al way of stop­ping that is, is through list­ing new com­pa­nies. And then you let them grow so they can replace the big ones that have been tak­en over.
[00:40:24] Tony: But um, yeah, it’s not hap­pen­ing
[00:40:26] Tony: at the moment.
[00:40:27] Cameron: But my ques­tion is, does it mat­ter to the ASX itself? How many com­pa­nies are list­ed? Like, the, the busi­ness that is the Aus­tralian Stock Exchange, uh, how is it impact­ed by the shrink­age in the total num­ber? I mean, the amount of mon­ey going into the stock mar­ket
[00:40:47] Tony: Mm hmm.
[00:40:49] Cameron: over time.
[00:40:49] Cameron: Do they, do they have an incen­tive to main­tain a rough­ly equal num­ber of busi­ness­es that are pub­licly list­ed or is it does­n’t mat­ter so much?
[00:41:03] Cameron: Who, who ben­e­fits from an increase in the num­ber of
[00:41:06] Cameron: stocks apart from investors hav­ing more options?
[00:41:10] Tony: well, the ASX as a com­pa­ny does. Um, because they charge fees to each com­pa­ny on the list, so they’re miss­ing out on list­ing fees. Um, but I think if you sort of do a bit of a reduc­tio ad absur­dum argu­ment on it, Um, if, if the ASX shrinks too far and becomes as big as You know, the New Zealand Stock Exchange, for exam­ple, then it’s, it’s just, um, less com­pa­nies for the invest­ment com­mu­ni­ty, but all the, all the funds start to shrink, all the stock­bro­kers go off­shore, so the infra­struc­ture, the life cycle around, or the lifeblood around the ASX shrinks, and it makes it, makes it It just becomes less attrac­tive, becomes a vir­tu­ous cir­cle that in reverse, it declines.
[00:41:55] Tony: And yeah, you get to a stage where every­one’s pick­ing over the same 50 com­pa­nies. It’s, it’s not as easy to, to find the undis­cov­ered gem.
[00:42:06] Cameron: I know it has an impact on us as investors poten­tial­ly, but, um, not sure. I mean, if, so the next ques­tion is, if there is. A big enough incen­tive for the ASX to main­tain the num­ber or grow the num­ber of com­pa­nies that are pub­licly list­ed. Why aren’t they mak­ing the changes to the fun­da­men­tals about how the sys­tem works that dri­ves that
[00:42:33] Tony: Cor­rect. Because they’re too busy try­ing to fix up the chess replace­ment sys­tem prob­a­bly.
[00:42:40] Cameron: Yeah. All right.
[00:42:42] Tony: they’ve been knocked around a bit. Yeah, inter­est­ing, yeah. I don’t think it’s affect­ing us at the moment, but I’d like to see the IPO mar­ket open up. I sus­pect it will any­way when inter­est rates drop and there’s a bit of a free­ing up of mon­ey.
[00:42:56] Tony: But at the moment, yeah, I think it’s a, it’s a Dan­ger­ous time for the ASX. If it can’t get com­pa­nies to list on the ASX as opposed to tak­ing pri­vate mon­ey or going off­shore, then yeah, the mar­ket will con­tract, which even­tu­al­ly will become prob­lem­at­ic. It won’t be, won’t be a prob­lem for a while, but it’s not a good, good thing to see hap­pen.
[00:43:18] Cameron: right. Okay. Well, thanks for that. What else you got?
[00:43:24] Tony: Pulled pork time
[00:43:26] Cameron: Uh,
[00:43:26] Tony: and then doing a pulled pork on Reg­is Health­care.
[00:43:30] Cameron: what’s their code?
[00:43:33] Tony: REG.
[00:43:34] Cameron: REG.
[00:43:35] Cameron: I don’t think I own any REG. I think it’s
[00:43:39] Tony: No, that’s good. Yep,
[00:43:43] Tony: it won’t
[00:43:43] Tony: affect our per­for­mance.
[00:43:44] Cameron: me about REG, Tony.
[00:43:47] Tony: Yeah, sure. Aged Care Ser­vices Provider. So, they oper­ate aged care facil­i­ties, retire­ment vil­lages, home care ser­vices, day ther­a­py and day respite pro­grams. So, peo­ple would have seen Reg­is Health logos around. Prob­a­bly most promi­nent­ly, the one I can think of was when my par­ents were in the retire­ment vil­lage, there was a Reg­is aged care facil­i­ty as an adjunct.
[00:44:16] Tony: So as you required more care, as you got old­er, you sort of just migrat­ed from one part of the retire­ment vil­lages into more of a hos­pi­tal type set­ting and received the care from Reg­is. So that’s, that’s my brush with them. Um, they were formed back in 1994 by Bri­an Dor­man and Ian Roberts. Ian Roberts was a Prop­er­ty devel­op­er and Bri­an Dor­man was an accoun­tant and Bri­an Dor­man saw an oppor­tu­ni­ty when he vis­it­ed the Cramp facil­i­ty in Footscray in Mel­bourne while work­ing as an accoun­tant and being unim­pressed he teamed up with E.
[00:44:53] Tony: M. Roberts to invest in elder­ly care homes. That was back in 1994. And then three years lat­er, there were sweep­ing changes to the gov­ern­ment fund­ing mod­el for aged care in 97 and it improved the sec­tor and enough so that Dor­man and Roberts began a series of acqui­si­tions that led a decade lat­er to a merg­er with the Mac­quar­ie Cap­i­tal backed Retire­ment Care Aus­tralia.
[00:45:19] Tony: And, uh, in 2013, uh, Mac­quar­ie Cap­i­tal sold its stake in the merged enti­ty to the two founders who then list­ed in 2014. Reg­is Health­care now pro­vides ser­vices and facil­i­ties to over 7, 600 old­er Aus­tralians and uh, oper­ates 68 aged care facil­i­ties around the coun­try. Um, I think look­ing through their sto­ry.
[00:45:50] Tony: Uh, par­tic­u­lar­ly in the recent years, there’s, there’s three impor­tant fac­tors to talk about, um, that affect aged care oper­a­tors. Um, the first being there was a Roy­al Com­mis­sion, uh, three or four years ago. The sec­ond being there is, uh, um, a pop­u­la­tion demo­graph­ic which is trend­ing old­er, and so the boomers are all get­ting to that age of of need­ing this kind of care, or start­ing to any­way.
[00:46:17] Tony: And the third impor­tant fac­tor in the last few years has been COVID. So to take each of those, um, in, uh, in there, uh, sep­a­rate­ly, um, the Roy­al Com­mis­sion into Aged Care has led to the release of a new Aged Care Act in Decem­ber 2023, um, it’s open for con­sul­ta­tion, but the Act will become law at some stage this year, uh, this, uh, this draft any­way, um, Reg­is believes will ben­e­fit Uh, them and, and some of the oth­er providers, and I guess the mar­ket does too, because, uh, Reg­is share price has been going up quite well over the last sort of 6 to 12 months.
[00:46:59] Tony: Uh, the rea­sons why it will, uh, the Aged Care Act will ben­e­fit, or the new Aged Care Act will ben­e­fit Reg­is is that it, it does include improved fund­ing, um, and Reg­is will get most of its funds from the gov­ern­ment. Um, to fund beds in their facil­i­ties and ser­vices. Uh, so there’s improved fund­ing to cov­er staff wage ris­es.
[00:47:22] Tony: And, um, that’s, uh, reg­u­lat­ed by an inde­pen­dent body. Um, there is, uh, anoth­er inde­pen­dent body to, oh, sor­ry, the same inde­pen­dent body to pro­vide fund­ing rec­om­men­da­tions which is linked to the actu­al costs of pro­vid­ing care, which had­n’t been the case in, in the, um, in the past. Uh, there is a, a man­dat­ed sys­tem of what they call care min­utes.
[00:47:50] Tony: So it’s like a reg­u­lat­ed num­ber of min­utes per day that a nurse and oth­er qual­i­fied per­son­nel have to be present and ser­vic­ing an aged care user. So that will hope­ful­ly remove some of the play­ers who aren’t doing that from the mar­ket. That’s also being rein­forced by star rat­ings so that Um, dif­fer­ent oper­a­tors in the sec­tor will get inde­pen­dent, uh, star rat­ings, which will show the good ones from the bad ones.
[00:48:21] Tony: And some of these are already hap­pen­ing because they’re imple­ment, uh, they were imple­ment­ed after the Roy­al Com­mis­sion. Some of them are in the draft leg­is­la­tion. Um, so, uh, This leg­is­la­tion and the out­put from the Roy­al Com­mis­sion has kind of lit a fire on the Reg­is Health­care stock because it has improved fund­ing to the sec­tor, which the Roy­al Com­mis­sion found was a, was basi­cal­ly a bro­ken mod­el where the gov­ern­ment said how much it was will­ing to pay, but that did­n’t take into account the cost of actu­al­ly pro­vid­ing ser­vices, which put these, these types of com­pa­nies and providers in a bind.
[00:48:54] Tony: Um, the sec­ond thing to talk about is the age­ing pop­u­la­tion. And so. The aver­age age of some­one enter­ing care at these facil­i­ties is around 84, and, uh, as the, as the boomer pop­u­la­tion Ages, that demo­graph­ic or that cohort of demo­graph­ic around that 84 age is get­ting larg­er and larg­er. And it’s esti­mat­ed that, um, in the fore­see­able future, there needs to be about 60 bil­lion invest­ed in the sec­tor to meet the demand of boomers as they reach that, uh, sort of 84 age cohort and need, um, sub­stan­tive, uh, age care.
[00:49:33] Tony: Uh, the last thing to talk about is COVID. Uh, which the com­pa­ny is now com­ing out of, but, um, com­pa­ny Reg­is Health­care and Aged Care in gen­er­al real­ly took a pound­ing dur­ing COVID with, you know, obvi­ous­ly their patients were the most vul­ner­a­ble to COVID and so the reg­u­la­tions around them oper­at­ing were the strictest, but also there were large staff cost increas­es because Peo­ple just did­n’t want to go and work in a nature care facil­i­ty.
[00:50:03] Tony: Plus, with the extra reg­u­la­tions, it required more staffing to admin­is­ter vac­cines and to do things as, you know, as remote­ly as they could, I guess, in the facil­i­ties that were oper­at­ing. So, that kind of hit to their cost has just gone away. They’ve called out that, um, they’re basi­cal­ly over the COVID cost bump, which is help­ing Reg­is to return to prof­itabil­i­ty.
[00:50:28] Tony: Um, and I guess that, that’s, the effect of COVID is borne out by the fact that, uh, Bri­an Dor­man, one of the own­ers, his com­pa­ny Ash­burn, joined up with Wash­ing­ton Salt. Pat­tin­son, uh, back in Novem­ber, 2020 to bid for the com­pa­ny, um, in the takeover at 1. 85. Um, and that was just after COVID. Uh, if they had have been suc­cess­ful, um, they would have reaped the ben­e­fits because the share price is basi­cal­ly dou­ble that today.
[00:50:55] Tony: So cer­tain­ly Bri­an Dor­man, the own­er real­ized the com­pa­ny was, um. was at its low point and that things will get bet­ter as COVID passed and that’s come to pass as well. I guess the oth­er point to men­tion in talk­ing about Reg­is before get­ting to the num­bers is that it’s the last list­ed aged care play on the ASX after Estia Health was tak­en over in August 23 by Bain Cap­i­tal.
[00:51:22] Tony: So, health­care and the play on demo­graph­ics and the pop­u­la­tion get­ting old­er has always been a favourite theme in the stock mar­ket, um, and so these providers have been tak­en over and been tak­en out, um, fund man­agers and large cor­po­ra­tions A large pool of invest­ments love to play in this space because they can see a road to prof­itabil­i­ty as the baby boomers get old­er.
[00:51:51] Tony: And so all that’s left now is Reg­is Health­care. And I guess it does raise the ques­tion whether they will last, or whether some­one will come along and try and take them out. Just as Wash­ing­ton Soul­Patch did try to do a cou­ple of years ago. But that’s by the by, we’ll see what hap­pens. If an investor does want to play in this space, its only option is Reg­is Health­care.
[00:52:13] Tony: Uh, the num­bers. So this is, I picked this one to do this week because it has a large ADT of 474, 000. So it’s um, it’s not near the top of the buy list, but it’s large enough to be of inter­est to most lis­ten­ers. Sen­ti­ment is very strong with this com­pa­ny, so its share price has recov­ered dra­mat­i­cal­ly in the last sort of 6 to 12 months.
[00:52:33] Tony: I’m doing my num­bers based on a share price of 3. 49, which it was on the week­end, but it’s already up to 3. 70 today, so since the last fig­ures, um, came out, there, uh, there has been a bump in the share price, which is, which is still going on. Uh, I’m using the lat­est fig­ures, which are in Stock Doc­tor now, so that’s, um, that’s good.
[00:52:53] Tony: 3. 49 was less than the con­sen­sus tar­get, but I’ve got a feel­ing 3. 70 is start­ing to reach up to it. Um, and. As I indi­cat­ed before, the com­pa­ny has­n’t been prof­itable since COVID, so I can’t, uh, the IV1 for this com­pa­ny is neg­a­tive, because we don’t have a pos­i­tive earn­ings per share to use in our cal­cu­la­tion, and IV2 is just slight­ly pos­i­tive at 1.
[00:53:16] Tony: 12, so well below the cur­rent share price, so we can’t score it for price,
[00:53:24] Tony: or val­ue on price. The yield is, is rea­son­able at 3. 94%, but, um, it’s not big enough to score it as a yield stock, and Just to make peo­ple aware, it goes ex div­i­dend on the 14th of March, so it’s com­ing up. Uh, Stock Doc­tor, Finan­cial Health and Trend. Finan­cial Health is an ear­ly warn­ing, and Trend is steady.
[00:53:45] Tony: So, we don’t score ear­ly warn­ing, but we’ll give it a score for steady. Uh, the P on this, in this stock is not applic­a­ble, so we score it as a zero, um, because it has­n’t made a prof­it for a while. The inter­est­ing thing though is that this com­pa­ny does have good oper­at­ing cash flow and free cash flow, um, but they just haven’t flowed through to the prof­it line yet.
[00:54:10] Tony: Uh, Bree just last made a prof­it back in Decem­ber 21, in that half. The big thing I think which is excit­ing the mar­ket again is this idea of the fore­cast, um, earn­ings per share is fore­cast to be prof­itable. So, fore­cast earn­ings per share is 11. 6 per­cent, uh, sor­ry, 11. 6 cents per share. and to make a prof­it in the next finan­cial year accord­ing­ly.
[00:54:32] Tony: So again, I think the mar­ket is focus­ing on what the fore­cast earn­ings per share are and plac­ing an empha­sis on that. Crop cap for this com­pa­ny is 5. 3 times, 5. 39 times, um, is 5. 39 times, I’ll get that right in a minute, um, which is good and net equi­ty per share is only two cents. So we can’t, um, we can’t buy it for book or book plus 30 or any­where near book val­ue.
[00:54:59] Tony: Uh, Growth over P. E. does­n’t score because we have a neg­a­tive P. E. What does score for us is Own­er Founders and those two mem­bers, two own­ers I men­tioned before, Roberts and his friend, own 55 per­cent of the stock. So, very strong pres­ence by Own­er Founders, so it scores for that. Um, I want­ed to high­light the fact it’s not scor­ing on con­sis­tent­ly increas­ing equi­ty.
[00:55:26] Tony: And the rea­son I’m high­light­ing this is because equi­ty is shrink­ing dra­mat­i­cal­ly, um, down from 158 mil­lion in Decem­ber 20, when it last made a prof­it. It’s now down to 4. 5 mil­lion in Decem­ber 23. So, um, it’s shrunk quite a lot and it’s, it’s get­ting close to Um, hav­ing no net equi­ty, which under­scores the ear­ly warn­ing, finan­cial health, and it puts pres­sure on Reg­is to return to prof­itabil­i­ty.
[00:55:52] Tony: So a lot of
[00:55:54] Tony: focus on, on get­ting that
[00:55:55] Tony: right, I guess.
[00:55:56] Cameron: why the big drop in net equi­ty? Is it just loans?
[00:56:00] Tony: uh, pos­si­bly, but I think it’s they’ve been using that mon­ey to sus­tain them­selves while they haven’t been mak­ing mon­ey. So they’ve been tak­ing retained earn­ings to pay for loss­es would be my guess. Um, dur­ing that peri­od, uh, so yeah, like, um, that’s been going on, some­thing to pay atten­tion to and a poten­tial risk
[00:56:18] Cameron: Hmm.
[00:56:19] Tony: Um, but all in all, uh, the qual­i­ty score is 8 out of 14, 57%, and the QAV score is 0. 11, which is just on the, on our buy list. But it’s a large ADT stock and it comes on the buy list this week for the first time. Uh, pos­i­tives and neg­a­tives. I think the, um, the pos­i­tives are that the gov­ern­ment does seem to be treat­ing the aged care sec­tor with the atten­tion and, um, and fund­ing it deserves.
[00:56:43] Tony: So, um, they’re also free­ing up some of the reg­u­la­tions around open­ing new cen­ters. And that’s, I guess, in acknowl­edge­ment and antic­i­pa­tion of the Boomer cohort get­ting old­er and need­ing a lot more beds. Um, but that helps Reg­is in terms of their Devel­op­ment, uh, uh, path­way going for­ward. The biggest pos­i­tive has got to be that too, that the boomers are get­ting old­er.
[00:57:05] Tony: So there’s going to be a lot more demand for these ser­vices going for­ward. The neg­a­tives, um, the low equi­ty wor­ries me a lit­tle bit and does put pres­sure on them to, to, to actu­al­ly get the prof­itabil­i­ty, not just fore­cast it. Um, but I’m also going to high­light this. What I think is a neg­a­tive is even though it’s improv­ing is gov­ern­ment reg­u­la­tion and reliance on gov­ern­ment fund­ing.
[00:57:26] Tony: And it’s. it’s. being fixed up now, but it was a big issue for this com­pa­ny, um, pri­or to the, the Roy­al Com­mis­sion into Aged Care. And I’ve just found over the years that com­pa­nies that rely on gov­ern­ment fund­ing can go through peri­ods where the gov­ern­ment For what­ev­er rea­son, gen­er­al­ly, because of tight fis­cal cir­cum­stances, lets the fund­ing slide.
[00:57:52] Tony: And it’s like a com­pa­ny with one cus­tomer, they’re behold­en to that cus­tomer and they can go through good and bad times with that. And hap­pens to be a good time at the moment, but it has been a bad time. And when the gov­ern­ment does­n’t pay, it does­n’t pay. There’s no one else to pay. So it can be a prob­lem for these kinds of com­pa­nies.
[00:58:11] Tony: So I’ll high­light that as a risk as well.
[00:58:12] Cameron: Hmm.
[00:58:14] Tony: Yeah. So that’s
[00:58:14] Tony: Reg­is.
[00:58:16] Cameron: They have been on our buy list before. I’m just look­ing back over the his­toric, his­tor­i­cal buy lists. Um, it’s been, uh, they sort of come on and off by the looks of it. Um, let’s see how far back I can find them.
[00:58:35] Tony: And don’t con­fuse them with Reg­is resources too,
[00:58:37] Tony: peo­ple. It’s very dif­fer­ent
[00:58:38] Tony: things.
[00:58:39] Cameron: Uh, what’s Reg­is Resources code?
[00:58:44] Tony: I don’t know.
[00:58:46] Cameron: These guys are
[00:58:47] Tony: And I’ll tell you,
[00:58:47] Cameron: right? Yeah. Okay.
[00:58:49] Tony: they are.
[00:58:49] Tony: Yep,
[00:58:51] Cameron: Reg­is Resources is RRL. Reg­is Resources Lim­it­ed? Yeah. No, Reg­is Resources, uh, risk, sor­ry. Reg­is Health­care back in April 22. They’re on our buy list. Uh, March 22 actu­al­ly. Yeah, they come on and they come off, but just look­ing at, I, I dun­no if we’ve ever bought them. Let me see if I’ve ever had them in there.
[00:59:15] Cameron: Uh, let’s see if they’re in my archive here.
[00:59:20] Tony: They would have been good buy­ing about a year ago too, because the share price has gone up
[00:59:23] Tony: dra­mat­i­cal­ly in the last year or
[00:59:25] Tony: so.
[00:59:25] Cameron: Yeah, I’ve got no record of ever own­ing them, but yeah, look­ing at their share price in the last year, it’s gone from 1. 48 March last year to 3. 50 today. It’s a bit of a cork­er of a year.
[00:59:42] Tony: Which I guess is because ana­lysts are work­ing out that the gov­ern­ment fund­ing will improve, and this com­pa­ny is so
[00:59:47] Tony: reliant on gov­ern­ment fund­ing.
[00:59:49] Cameron: I’m won­der­ing about the nature of this star rat­ing sys­tem for elder­ly care cen­ters. Is it like, is it based around the aver­age num­ber of rats found in the rooms of the elder­ly peo­ple? Like if it’s,
[01:00:00] Tony: Well, it prob­a­bly is. You get a one
[01:00:02] Tony: star for
[01:00:02] Cameron: it inverse? It’s the inverse. So
[01:00:07] Tony: Mm.
[01:00:08] Cameron: for every, for every five rats we take away, uh, take away a star.
[01:00:14] Cameron: I
[01:00:14] Tony: Yeah. Well, I mean, that’s, we joke about it, but that’s been a prob­lem with the aged care sec­tor for a long time is, is neglect, uh, because the gov­ern­ment has­n’t been
[01:00:22] Tony: fund­ing it to the lev­el it
[01:00:23] Tony: prob­a­bly should,
[01:00:24] Cameron: mean, the sto­ries that came out in the Roy­al Com­mis­sion were just hor­ri­fy­ing, like phys­i­cal abuse, sex­u­al abuse, emo­tion­al abuse, uh, just hor­ri­fy­ing. Like,
[01:00:38] Cameron: ugh, I’m
[01:00:39] Tony: Yeah. And. I can’t recall Reg­is’s name being linked with any of that, so I sus­pect it was­n’t. Um, and I guess what, where they’re com­ing from is they’re a big play­er in the field that can afford to set good stan­dards in and pay their staff well, and the star rat­ing will get, hope­ful­ly get rid of some of the cow­boys, small­er oper­a­tors who might be more inclined to cut cor­ners.
[01:01:03] Cameron: try­ing to decide whether or not I should call this episode Count­ing the Rats or some­thing, but I’d steer clear. It’s too dark even for me. Uh, alright. Oh, thank you for that one, Tony. It’s the one that I wish I’d had in our port­fo­lios
[01:01:19] Tony: yeah,
[01:01:20] Cameron: over the last year. What did you say it’s, uh, ADT is? 474,
[01:01:26] Tony: it’s
[01:01:28] Tony: 450, if I
[01:01:29] Cameron: 000,
[01:01:30] Cameron: yeah. Too small for you, but big enough for most
[01:01:34] Cameron: peo­ple. cap 1. 1 bil­lion.
[01:01:41] Cameron: Alrighty, have a look at that, folks. Well, that’s it for the reg­u­lar part of the show. No ques­tions. Today, Tony, we’ve answered all the ques­tions that any­one can
[01:01:54] Cameron: ever have had about QAV.
[01:01:59] Tony: I’m sur­prised because you and I read the paper and we have ques­tions about Ray Dalio and oth­er things, I’m sure peo­ple are out there, all you got to do is open the paper, you’ll have ques­tions, so please
[01:02:09] Tony: send them in.
[01:02:11] Cameron: Or don’t. Um, it’s like, it’s not like
[01:02:14] Tony: talked for an hour and a half,
[01:02:15] Cameron: know.
[01:02:16] Cameron: Yeah,
[01:02:17] Tony: our life eas­i­er,
[01:02:18] Tony: we don’t get
[01:02:19] Cameron: you don’t have to do research to answer ques­tions
[01:02:22] Tony: Yeah,
[01:02:22] Tony: cor­rect.
[01:02:23] Cameron: After Hours, TK, what have you been doing out­side of invest­ing in the last week? What’s tak­en your
[01:02:27] Tony: Yeah, I know that.
[01:02:28] Cameron: Clean­ing, apart from clean­ing your
[01:02:30] Tony: yeah, set­ting up the apart­ment for sale, build­ing fur­ni­ture comes, comes deliv­ered. Um, yeah, no, not much. Uh, look, I, look, I’ve been, you know, I’ve watched a num­ber of things, which are just kind of great when you’re tired after clean­ing the apart­ment and set­ting it up at eight o’clock at night.
[01:02:49] Tony: So the new series of Dri­ve to Sur­vives on Net­flix, it’s okay, like, like keep going back to suits. Which is, it’s fine. It’s get­ting, get­ting a bit, a bit stranger and a bit more soap opera ish as it goes on, but it’s, it’s fun. Um, but I still like going back to my old Aussie movies, and I watched Emer­ald City the oth­er night.
[01:03:10] Tony: Have you ever seen that?
[01:03:12] Cameron: Uh, look, I don’t I think so. I’m just look­ing it up. Was­n’t
[01:03:19] Tony: So David Williamson played, and I love David Williamson plays, I think he’s a nation­al trea­sure. Love read­ing his, his works. Uh, was a play, they made it into a movie star­ring John Har­graves, who I, Admire great­ly, Robin Nevin, uh, Nicole Kid­man,
[01:03:37] Cameron: Mm hmm.
[01:03:38] Tony: um, yep, so good, good, strong cast, Ruth Crack­nell was in it, yeah, Chris Hay­wood is in it, um, and it’s, it’s just a trea­tise on the Mel­bourne Syd­ney divide, which I found amus­ing giv­en that I’m liv­ing in Syd­ney and think­ing of mov­ing back to
[01:03:54] Cameron: Mm hmm.
[01:03:55] Tony: it’s, it’s about a, a play­wright.
[01:03:57] Tony: John Har­groves who comes north from Mel­bourne, um, Ruth Kruck­nal­l’s his agent in Syd­ney with the Big Har­bour Views, Chris Hay­wood’s the hus­tler who just wants mon­ey, um, and it’s the ten­sion between that dynam­ic of Syd­ney being all, all show and all about the mon­ey and Mel­bourne being more cul­tur­al and more about the sto­ry,
[01:04:17] Tony: so it was fun, inter­est­ing, worth watch­ing.
[01:04:20] Cameron: Holds up well.
[01:04:21] Tony: Yeah, I liked it.
[01:04:24] Cameron: Very good. I’ll have to check it out. I fin­ished, uh, Chris­sy and I fin­ished True Detec­tive.
[01:04:31] Tony: Yeah.
[01:04:32] Cameron: but yeah, like the, it was­n’t the end­ing I was expect­ing. Uh, but I liked it.
[01:04:38] Tony: Was­n’t I? It was good, was­n’t it? Because it basi­cal­ly resolved every­thing back to prac­ti­cal­i­ties and the woo woo goes
[01:04:43] Tony: away, which I real­ly enjoyed.
[01:04:44] Cameron: Yeah. Yeah. I was kind of wait­ing for some­thing big and then it was like, Oh, okay. I’ll pay that. Yeah. Sort of. It was a lit­tle bit anti­cli­mac­tic, but I liked it. Yeah.
[01:04:56] Tony: Yeah.
[01:04:57] Tony: so I’ve had the same reac­tion, anti­cli­mac­tic and real­is­tic, and you kind of fed it in along the way that the police report, or the report comes in say­ing that this is the rea­son why the men were all killed, and straight away Jodie Fos­ter thinks, oh you’re cov­er­ing it up, can’t be that, yeah,
[01:05:16] Cameron: Yeah.
[01:05:16] Tony: and as
[01:05:17] Tony: it turns out, she works it out
[01:05:18] Tony: as well.
[01:05:19] Cameron: I like it when she and her off­side would go to vis­it the women and the women are like, yeah, it’s what we did. And they’re like,
[01:05:28] Cameron: Okay, well, just want­ed to let you know.
[01:05:34] Tony: Yeah, it still had that sort of small town vibe to it, did­n’t it?
[01:05:38] Cameron: yeah,
[01:05:38] Tony: Yeah, I loved it. I thought that was great. Real­ly, real­ly
[01:05:41] Tony: real­is­tic end­ing.
[01:05:42] Cameron: yeah, yeah, it’s sort of, they tied a bow around it nice­ly, in a way. Like the woo woo stuff, I went along with it, but I’m like, uh, real­ly? But then they tied a nice bow around it at the end, so it was good.
[01:05:56] Tony: Yeah.
[01:05:57] Cameron: I start­ed watch­ing Mr. and Mrs. Smith. You watched any of that yet?
[01:06:02] Tony: No. It’s been on my
[01:06:03] Tony: list, but I haven’t got­ten around to it.
[01:06:04] Tony: Is it good?
[01:06:05] Cameron: Don’t know yet. I’m only one and a half episodes in. Um, the cast is good. And the rea­son I end­ed up watch­ing it is I am a big fan of Don­ald Glover and his series, Atlanta. I don’t know if you’ve ever seen Atlanta, but one of the best things that’s been on tele­vi­sion in the last five or six years. Oh, yeah.
[01:06:24] Cameron: Well, if you’re, you know, if you like the kind of stuff that Chris­sy and I like, I mean, it’s, um, set in Atlanta about a cou­ple of black guys, one, you know, from the, you know, the, the sub­urbs of Atlanta, one, one’s a rap­per who has some suc­cess and Don­ald Glovers is. cousin who becomes his man­ag­er because he just needs a man­ag­er and he’s nev­er done it before.
[01:06:49] Cameron: And then they got the best friend who’s a bit of a spacey drug­gie, but it’s, it’s one of these things. It’s all black cast, black writ­ers, black direc­tors telling a sto­ry of, you know, a black per­son, African Amer­i­can sto­ry in Atlanta. And I kind of like that. I kind of like when you see dif­fer­ent.
[01:07:09] Cameron: Per­spec­tives and sto­ries told from dif­fer­ent per­spec­tives. There’s a lot of stuff about, you know, there’s a lot of it is about what it’s like to be black in Amer­i­ca, you know, even if you’re
[01:07:18] Tony: Mm
[01:07:19] Tony: hmm.
[01:07:20] Cameron: rich and famous, just the lev­el of racism and, and how crazy white peo­ple are and all this kind of stuff that goes along with it.
[01:07:29] Cameron: And it’s, and it’s also a lit­tle bit sort of sur­re­al­ist. As the series goes on, it’s just sur­re­al­ist episodes that you’re like, well, that had noth­ing to do with the, there’s no over­ar­ch­ing sto­ry arc real­ly about, except for these three guys and their lives. But it’s just every now and again, you get an episode and you’re like, Oh, I did­n’t see that com­ing.
[01:07:49] Cameron: But my point is that, um, Mr. and Mrs. Smith, loose­ly based on the same premise as the Angeli­na Jolie, Brad Pitt film from the nineties, hus­band and wife assas­sins. Um, But it’s writ­ten by and pro­duced by Don­ald Glover, as was Atlanta orig­i­nal­ly, and it’s the same direc­tor from Atlanta, so it looks like he’s tak­en his same crew and they’ve tried to do some­thing that’s a lit­tle bit more main­stream and a lit­tle bit more sort of shit blows up and peo­ple get shot and, you know, that kind of stuff.
[01:08:25] Cameron: So, uh, I don’t know. I don’t know how it’s going to work, but I like the peo­ple behind it. That’s always, for me, it’s a good enough rea­son to give some­thing a fair shake of the leg. Um,
[01:08:37] Tony: sto­ries from a par­tic­u­lar area, eth­nic­i­ty, etc., and being true to that. That was one of the themes of Emer­ald City. And I remem­ber read­ing it a ton. Appar­ent­ly David Williamson wrote this, the play, as a response to Spiel­berg option­ing Thomas Keneal­ly’s Schindler’s Ark and it’s, they talk about, um, plays being tak­en over to the States and, um, the, one of the themes in the, in the Emer­ald City is that there’s a black writer who has a nov­el and it would­n’t get pub­lished and then, um, Long sto­ry short, it does.
[01:09:13] Tony: And it gets short­list­ed for the Book­er Prize, and then Spiel­berg options it. And, y’know, John Har­grove says, So we’re gonna see some aliens with the blacks, are we?
[01:09:22] Cameron: yeah. And then the aliens arrived.
[01:09:25] Tony: it, yeah, I
[01:09:26] Tony: told you
[01:09:28] Cameron: been try­ing to watch the lat­est Indi­ana Jones film too, which I know Spiel­berg did­n’t direct, Man­gold did, but, uh, I tell you an inter­est­ing thought I had. So I was watch­ing, have you seen it? I think you saw it, right?
[01:09:44] Tony: Indy Jones. I love the way, in the action scenes, he takes about two steps to run into cam­era. That’s meant to be him run­ning along
[01:09:52] Tony: to get to the scene.
[01:09:54] Tony: It’s great.
[01:09:54] Cameron: Well, I’m only about, I don’t know, maybe halfway through. I keep get­ting inter­rupt­ed when I try and watch it, but in the first 10 or 15 min­utes, it’s set in World War II, and they’ve de aged Har­ri­son Ford.
[01:10:06] Tony: hmm.
[01:10:07] Cameron: so I was watch­ing it at some point think­ing, okay, I know that they’ve used CG and AI to de age Har­ri­son Ford.
[01:10:16] Cameron: I know that the va every­thing else that’s going on is CG. You know, explo­sions and run­ning on the top of the train and all this kind of stuff, it’s all CG. Har­ri­son Ford’s basi­cal­ly AI at this stage. If it was just full AI that had recre­at­ed his face and his voice, if this was, like, it’s already 85 per­cent dig­i­tal­ly cre­at­ed effects.
[01:10:46] Cameron: If it was 100%, would my appre­ci­a­tion of it be much dif­fer­ent? Because I’m accept­ing the fact that it’s all CG, all the spe­cial effects and every­thing. I’m accept­ing the fact that they’ve de aged Har­ri­son Ford to make him look like he did in the 80s.
[01:11:05] Tony: Mm hmm.
[01:11:07] Cameron: Am I real­ly gonna give a shit if it’s just, you know, go the extra notch and just remove all the real actors and make it all CGA?
[01:11:14] Cameron: Even, you know, with the de aging, it’s pret­ty good. I mean, I thought this is the best de aging job I’ve seen so far. Like, the rest of them in the Star Wars films and Uh, the, the Star Wars, the, the Man­dalo­ri­an, I don’t know if you saw them do Mark Hamill in the Man­dalo­ri­an.
[01:11:31] Tony: Yeah.
[01:11:32] Cameron: They’re good, but they’re not great, they’re still a lit­tle bit sort of Uncan­ny Val­ley ish, you know.
[01:11:39] Cameron: This, I did­n’t real­ly get it, oh, and, and of course the Irish­man as well, which was pret­ty good. Um, but I’m not get­ting any sort of, Ooh, this is, does­n’t look quite right thing with me. I’m buy­ing that it’s a young Har­ri­son Ford.
[01:11:51] Tony: And I think one of the rea­sons for that, sor­ry to inter­rupt. I think one of the rea­sons is it, um, like in the Irish­man, you had a young face, but every­thing else was real. But in the Har­ri­son Ford movie, you’ve got a young face, which is CGI, run­ning on a train, which is CGI, like every­thing CGI. So it’s, it’s, I think that helps make the, the aging
[01:12:09] Tony: process look real.
[01:12:09] Cameron: Also, it was made three or four years lat­er and like the tech­nol­o­gy
[01:12:13] Cameron: is improv­ing leaps and bounds. So it was just inter­est­ing for me think­ing, yeah, I prob­a­bly, I’m not going to care when it’s all, when it’s all AI gen­er­at­ed, I don’t know that I’m going to give a shit. And I thought I would,
[01:12:26] Cameron: but.
[01:12:27] Tony: Hence the,
[01:12:27] Tony: rid­ers
[01:12:28] Tony: strike.
[01:12:29] Cameron: Yeah, yeah, which kind of was point­less real­ly. I’ve read the pro­vi­sions that they put into it and it’s not worth much. Easy to get around. But speak­ing of AI, I heard about this sto­ry and so I dug it up. I’ve been read­ing this col­lec­tion of Isaac Asi­mov’s sci­ence fic­tion short sto­ries
[01:12:50] Tony: Oh, good.
[01:12:51] Cameron: and there’s one called The Feel­ing of Pow­er from 1958. I was won­der­ing if you’d ever read it.
[01:12:57] Cameron: I know you’ve.
[01:12:58] Tony: Oh, I’m sure, I, sure I
[01:12:59] Cameron: Yeah, you’ve read most of his
[01:13:01] Tony: Big Asi­mov. Yeah. Big
[01:13:02] Tony: Asi­mov
[01:13:03] Cameron: in the intro­duc­tion to the col­lec­tion that I’m read­ing, which I think he wrote late in life, so he died like ear­ly 90s I think, so I think he was writ­ing this intro­duc­tion late 80s ear­ly 90s, and he talked about the fact that robot­ics was now a field and took cred­it for the fact that he invent­ed the word robot­ics, um, kick­ing him­self for not call­ing the brain of the robots a com­put­er, call­ing it a positron­ic brain, Yeah.
[01:13:31] Tony: Remem­ber
[01:13:31] Cameron: And it’s quite, it’s quite a, quite a nice intro, because he’s sort of talk­ing about the risks that you run, even as a hard sci­ence guy, like he was, try­ing to fore­cast into the future things he got wrong, the things he did­n’t. And God, I wish he was alive now. I wish guys like him, and Clark, and, um, Robert, uh,
[01:13:51] Cameron: what­ev­er his name
[01:13:51] Tony: High­land.
[01:13:52] Cameron: High­land, yeah. And, and um, uh, the guy who wrote Blade Run­ner, whose name escapes me.
[01:14:00] Tony: Oh, Philip k
[01:14:01] Cameron: Yeah, PKDick. Oh jeez, God, I wish those guys were around now to see what’s hap­pen­ing because, you know, it’s all of their stuff is start­ing to come true with the robots that we’ve got now. Any­way.
[01:14:15] Tony: Yeah. And, and William Gib­son. There’s
[01:14:18] Cameron: Yeah, well he is around,
[01:14:20] Tony: he’s around. Yeah. There’s a cur­rent crop that’s still around, for
[01:14:23] Cameron: Neil Steven­son,
[01:14:24] Tony: Yeah.
[01:14:25] Cameron: guy I inter­viewed years ago, Ver­na Vinge, I inter­viewed him like ear­ly on in pod­cast­ing, 20 odd years, near­ly 20 years ago, he’s still around. Any­way, um, in this par­tic­u­lar short sto­ry, it’s set in the far future where every­thing is done by com­put­ers and peo­ple have for­got­ten that math­e­mat­ics is a thing.
[01:14:45] Cameron: And this guy comes up with the abil­i­ty to do math­e­mat­ics on paper and at first they think it’s a trick. And then he proves it, and he shows that not only addi­tion, but he can do sub­trac­tion, mul­ti­pli­ca­tion, divi­sion, and then it starts to become, the mil­i­tary get involved, because they’ve reached a, like an impasse with their big ene­my, this oth­er plan­et, where they’re all build­ing com­put­ers And they’re like, well, all of the mis­siles, they’re like, if we could build a mis­sile where you did­n’t have to use a com­put­er to fig­ure, to be on board to gen­er­ate the coor­di­nates or the tar­get­ing, if you could have a human dri­ve it and manip­u­late it, it’d be cheap­er, faster, lighter.
[01:15:31] Cameron: Um, and they’re look­ing for. Some­thing that’s not com­put­er dri­ven to be the secret weapon that they have. And then they, the tech­ni­cian who came up with the abil­i­ty to do maths, um, just as a, he just thought it was a fun hob­by, ends up real­iz­ing that what he’s built is going to kill peo­ple, so he kills him­self and they sort of don’t care.
[01:15:55] Cameron: And they move on with­out him because the cat’s out of the bag. Now you can do maths with­out a com­put­er. I thought it was a real­ly inter­est­ing sort of
[01:16:03] Tony: It is,
[01:16:03] Tony: isn’t it? Yeah.
[01:16:04] Cameron: And some­body men­tioned it
[01:16:05] Cameron: because I read it in a Red­dit post and peo­ple were say­ing, well, more and more AI hap­pens. Are we going to become dumb­er as a species?
[01:16:12] Cameron: Are we going to for­get how to do things? And over gen­er­a­tions, will peo­ple for­get how to do basic, you know, things like maths? And some­body said, yeah, it reminds me of this sto­ry. So I looked it up. I thought it was real­ly good.
[01:16:26] Tony: Well, I remem­ber there are plen­ty of, um, plen­ty of arti­cles and plen­ty of famous peo­ple com­ing out and say­ing cal­cu­la­tors were bad for school chil­dren back in the 70s and 80s and you should­n’t have cal­cu­la­tors in school because you’re going to lose your school. Math skills and all that.
[01:16:42] Tony: It’s sim­i­lar, but we haven’t.
[01:16:44] Cameron: Mmm,
[01:16:46] Tony: I think it’s an inter­est­ing sto­ry, inter­est­ing con­cept, but I think that what I find inter­est­ing is that if I drop my phone and break it, I’ve got no idea how to repair it. If I mean, or my, or a watch or my com­put­er, they’re the skills which have already passed most peo­ple
[01:17:03] Cameron: Mmm,
[01:17:03] Tony: So, you know, at what stage, I guess, It’s not a big leap that we’re behold­ing to com­put­ers to fix the com­put­ers and then they’ve got us over a bar­rel because we can’t do it our­selves.
[01:17:15] Cameron: Mmm, Yeah! Well, it’s, you know, if, if, I don’t know, the, the apoc­a­lypse hap­pens, I’m screwed. I mean, at least
[01:17:28] Tony: You’re not
[01:17:29] Tony: lying.
[01:17:29] Cameron: Chris­sy knows how to make a fire.
[01:17:31] Cameron: I don’t even know how to make a fire by rub­bing sticks togeth­er. At least she can do that. That actu­al­ly, that actu­al­ly gets men­tioned in that short sto­ry, actu­al­ly. They’re like talk­ing about all of these myths of things that peo­ple could once do, includ­ing make a fire. You know, along with maths and stuff.
[01:17:51] Tony: I seem to recall too, the feel­ing of pow­er was some­one at the end of the sto­ry. Talk­ing about the guy who killed him­self and this guy, and the, the guy who’s, um, think­ing about it is also doing some sums in his head.
[01:18:04] Tony: And he, he felt, he felt the
[01:18:06] Tony: feel­ing of pow­er.
[01:18:07] Cameron: it’s exact­ly, it. There was the feel­ing of pow­er to be able to do maths with­out a com­put­er to do it for you. Yeah.
[01:18:13] Tony: Mm
[01:18:14] Cameron: You know, I often think about like Fox’s gen­er­a­tion, I mean, I, I don’t think he’s ever gonna need to learn how to dri­ve a car. He’s prob­a­bly nev­er gonna have to own a car. Um, he prob­a­bly isn’t have gonna have to do a lot of things that we had to know how to do grow­ing up.
[01:18:30] Tony: Yes and no. I mean, I, I find they’re, they’re good pre­dic­tions, but my expe­ri­ences, they take a lot longer to come about than we first think,
[01:18:40] Cameron: Sure.
[01:18:41] Tony: Dri­vers dri­ver­less cars has been a, well, fly­ing cars has been a thing since the Jet­sons in the six­ties. Dri­ver­less cars has been a thing for at least 10 years, and we still don’t real­ly have them yet, even though they’re semi dri­ver­less.
[01:18:52] Tony: But, but yeah, I don’t know.
[01:18:55] Tony: We’ll see.
[01:18:56] Cameron: Well, yeah, they, they. They’ve been try­ing to fig­ure it out, um, for a long time, but we were try­ing to fig­ure out com­put­ers that could talk to us and could accept Eng­lish lan­guage, too. I mean, and that, to me, is the big thing that we seem to have cracked now, is com­put­ers that can process
[01:19:19] Cameron: data that’s unstruc­tured. It can read lan­guage now and under­stand, quote unquote, depend­ing on your def­i­n­i­tion of under­stand. It can inter­pret, let’s use that, it can inter­pret, it can parse Eng­lish lan­guage or any oth­er lan­guage, not just Eng­lish, you know, any lan­guage. So that changes every­thing. In terms of get­ting data in and out.
[01:19:46] Cameron: And train­ing neur­al net­work sys­tems, once they can under­stand lan­guage, it changes every­thing else that requires a com­put­er to be trained to be able to do stuff. And we’re mak­ing huge progress with neur­al net­works, um, with visu­al recog­ni­tion sys­tems as well, which is required for self dri­ving cars. The abil­i­ty, you know, there’s things like the, the speed that’s required to process this infor­ma­tion, uh, needs to be very fast, obvi­ous­ly, for reac­tion times.
[01:20:22] Cameron: So there’s a, there’s a cou­ple of leaps we have to make there in terms of self dri­ving vehi­cles to be able to access the neur­al net­works, because you’re not going to have them on board, obvi­ous­ly. Um, you can’t have a mas­sive serv­er farm with 10, 000 GPUs in the back­seat. Mm.
[01:20:44] Tony: Did you see, did you see the arti­cle in today’s a FR about, uh, the back­lash, uh, against Google’s? AI that pro­duces pic­tures for you because of the polit­i­cal cor­rect­ness that’s
[01:20:55] Tony: crept into it.
[01:20:56] Cameron: Yeah. Yeah. You know, I saw all that, that actu­al­ly broke like a week or so ago. AFR is behind. Yeah.
[01:21:04] Cameron: Yeah. Elon had a lot to say about that.
[01:21:07] Tony: They did. Yeah. Well, again, I think it’s fun­ny, like, like, we, you know, got this great cut­ting edge tech­nol­o­gy and we’re using it to fight the cul­ture wars again. It’s like, who cares if they put a black per­son in the, you know, Supreme Court a hun­dred years ago or what­ev­er.
[01:21:25] Cameron: Yeah. Yeah. There’s a lot of, uh, yeah. I mean the, the cur­rent polit­i­cal cli­mate and there’s always gonna play a role in these things. Like Don­ald Trump, the Supreme Court com­ing down on his side over the whole, uh, Col­orado thing. Not sur­pris­ing,
[01:21:46] Tony: Not sur­pris­ing and a fair­ly lim­it­ed deci­sion. Lim­it­ed deci­sion though. I don’t think it’s going to be a prece­dent for when he does face what­ev­er call it’s going to over Jan­u­ary 6. It was a fair­ly, fair­ly lim­it­ed thing about states rights around whether they could stop some­one from run­ning for pres­i­dent.
[01:22:05] Cameron: Hmm. Hmm. It’s going to be an inter­est­ing six months.
[01:22:12] Tony: It always has been. Always will be.
[01:22:16] Cameron: This time it’s dif­fer­ent, Tony. All right. Well, that’s all I’ve got for this
[01:22:23] Cameron: week. All right. Thank you. QAV a good week, Tony.
[01:22:27] Tony: thank you. Hap­py ASX. Um, yeah. Good to chat and talk to you next week.
[01:22:32] Cameron: Cheers.